Mark Zuckerberg, Facebook chairman and CEO, testifies at a House Financial Services Committee hearing in Washington on October 23, 2019.
Erin Scott | Reuters
Mark Zuckerberg spent most of Facebook’s earnings call on Wednesday outlining the company’s e-commerce strategy, which will be critical to how the social media company started its advertising business after one of the biggest changes in mobile ad targeting expands.
The company’s most popular e-commerce offering today is the marketplace, where users can buy and sell goods from one another directly through Facebook. Zuckerberg said the Marketplace now has more than 1 billion monthly users.
Zuckerberg also talked about Facebook Shops and Instagram Shops, two features launched last year that allow brands to upload their catalogs and sell their products directly on social networks. He also alluded to Creator Shops, a feature he announced earlier this week that will allow Instagram developers to enable e-commerce on their profiles.
Zuckerberg’s comments on Wednesday were his first to analysts since Apple released iOS 14.5 on Monday, an update to the iPhone and iPad operating systems that allows users to choose which apps are allowed to track their activity on their devices.
For Facebook, tracking user activity was critical to measuring how effective personalized ads are. The company relied on a metric called view-through conversions. It measures how many people saw an ad but didn’t click it immediately, and later made a purchase related to that ad.
But Apple’s change creates uncertainty. Nobody knows how many iPhone users are allowing the social media company to track their activity beyond Facebook.
This is where these ecommerce products come in. If Facebook can sell more products through its own apps, it doesn’t depend as much on cross-location user tracking.
This is how it would work in theory:
An advertiser may choose to serve an ad for a product, e.g. B. Sneakers, pay to Instagram users who follow creators whose content is focused on sneakers. A user can click on the ad and be redirected to the brand’s Instagram shop, where they can pay for the advertised sneakers directly in the Facebook app. In this scenario, the advertiser achieves their intended goal, the user buys the item directly on Instagram, and Facebook can still prove the effectiveness of their ads.
Facebook isn’t getting into the trade because it wants to compete with Amazon or Walmart. In most cases Facebook only charges a 5% fee that includes things like taxes and payment processing. It’s not about making money from sales, but rather from advertising promoting these products.
Although Facebook groaned and annoyed Apple’s iOS 14.5 changes for months, CFO David Wehner told analysts on Wednesday: “In our opinion, the effects on our own business will be manageable.”
Investors seem to be buying that claim. The market sent Facebook shares up more than 6% after hours after the company beat sales and earnings expectations.